Monday, 28 May 2007
Appropriation Bill (No. 1) 2007-2008
I am surprised that the member for Cowper did not use all his time to comment on the so-called positive matters that were dealt with in the budget. I want to say before he leaves that economic management does take a lot of hard work, but I noticed in his contribution he failed to mention at all any of the remarkable changes to the economy undertaken in the years of Hawke and Keating, because they were certainly fundamentals that this government has been able to build on. But it never fully appreciates that it was under a Labor government that we were able to break the back of inflation, that we were able to move from a highly centralised system of wage-fixing to an enterprise based system of bargaining based on productivity outcomes. None of that, of course, is mentioned.
Nor did the member for Cowper mention that his government has been incredibly lucky to be presiding over international economic good fortune. I think the outcomes that we saw in this year’s budget owe much to that. A lot of it was very welcome—the one-off payments to a range of groups and people are well deserved. The carers and the pensioners are very thankful that the largesse in this year’s budget did extend to many people facing very bleak times in terms of the financial pressure on their household budgets. The tax relief and the one-off payments were to be welcomed.
But I think the budget is marked by a very obvious failure to put in place the underpinnings that we need to meet some very important challenges in the decade ahead. In the Leader of the Opposition’s reply to the budget this year there were a couple of statements that I want to repeat because I think they set the context for the remarks that I want to make on this debate about appropriations. The Leader of the Opposition, the member for Griffith, made it clear in his budget response that budgets should not be just about the next election but about the next decade and the decades beyond that. One could certainly characterise this year’s budget as one that was very carefully marketed and targeted to groups that the government saw as important vote changers potentially in the coming election. The Leader of the Opposition went on to say that we could anticipate many challenges and that we should act on those challenges while there is still time, or we would fritter away the opportunities before the nation and squander the opportunities in meeting those challenges. Now is as good a time as ever, as he said, to fix the roof while the sun is shining.
I think the budget really relied on the good fortune and the good luck that comes with a huge resource and mining boom that is not just evident in Australia but evident internationally. It relied, I think, on a lot of that good fortune rather than painstaking work to ensure that the future constraints on economic growth were adequately dealt with. Our economic growth path owes much to the economic reforms of the Hawke-Keating era, but we have known for at least a decade—the time that this government has been in power—that the Australian economy would come up against capacity constraints, that it would come up against infrastructure backlogs and that there would be a day of reckoning about the skills crisis and shortages which are so endemic in our economic system. Despite knowing of these capacity constraints and other challenges, complacency has been the order of the day under this government. We needed to see in the budget economic policies that were directed to the supply side of the economy because the supply side constraints are important in helping to build the nation’s productive potential. Unless we address the supply side of the economy, a lot of the good fortune that we are relying on will slowly come to a grinding halt once the boom years are over.
The budget papers concede that the world economy is enjoying the fastest rate of growth for over 30 years, but there are few countries benefiting as much from the boom as Australia because of our traditional reliance on high volumes of mineral commodity exports. At present, we are enjoying the highest prices for our commodity exports on record and the highest terms of trade in 50 years—although, as each monthly figure shows, we are not capitalising on the terms of trade because we still have very high levels of imports, which are not being matched by any coherent import replacement policies or any long-term views about how you underpin the necessity for even higher volumes of manufactured exports into the future once the days of the mining boom are over.
There is no doubt that, particularly in the last five years, changes to budget parameters have been driven by the soaring terms of trade that come as a result of the mining boom, which has added over $300 billion to the budget and, in a very short space of time, a $53 billion increase since mid-year budget forecasts. The budget papers describe an economy which is being driven by a tidal wave of revenue from the mining boom.
If you look at the papers carefully, you see the analysis contained within them in fact pours cold water on the government’s claim that it is their extreme industrial relations agenda and their legislation that have positive outcomes for employment. They are back-pedalling on the name of the legislation—which as of today has no name, even though the community at large understands the name and the impact of the words Work Choices very clearly. Just weeks ago they were claiming in the parliament that the positive employment growth outcomes were directly attributable to the impact of the Work Choices legislation. The Treasurer should look at his own papers, because they confirm a quite different picture and the papers say that the employment growth has in fact been driven by the mining boom and not by the IR legislation.
We can see that with employment growth of 7.6 per cent in the construction and mining sectors in the year to March 2007. The budget papers confirm that the mining boom is driving growth across the whole economy, highlighting:
... continued stimulus to household income and wealth from high commodity prices.
This is not just from jobs growth but also from record share prices being led by mining companies, and you see that every night if you stay up and watch the Lateline program and beyond, which shows the mining sector reaping windfall profits as share prices go through the roof.
The budget falls short of comprehending the scale of the challenges that face Australia in preparing for improved living standards beyond the mining boom, and it is some of those issues that I want to deal with in the comments tonight. I think the biggest failure of this year’s budget was the failure to put in place measures that would secure and build long-term economic prosperity beyond the years of the mining boom. As we all know—and that is why we put such a singular importance on the issue of productivity—it is only by continuing productivity growth that we can bring about long-term economic prosperity through sustained economic growth, through more jobs and higher living standards without unleashing inflation. That is why I made the point earlier that it was under a Labor government that this country in fact moved to a system of enterprise bargaining centred on productivity outcomes that has provided the underpinnings for the good fortune that the Howard government has been able to capitalise on.
But the trends of productivity growth are very worrying and our recent record has been very poor. From averages of around three per cent, to 3.2 per cent productivity growth in the mid-1990s, to about 2.2 per cent at the turn of the decade, the current estimate for the current decade is just 1½ per cent productivity growth. In fact, even this figure is very much under challenge by independent analysis. I refer to a recent article by the economics correspondent for the Australian in which he argues:
Treasury is counting on the best productivity performance in seven years to lift economic growth in the year ahead.
However, an analysis of the budget by the Parliamentary Library shows Treasury does not expect any productivity growth at all in 2006-07, and says the poor performance makes the target—
that is, a lifting of economic growth in the year ahead—
a tall order.
The report from the library says:
Poor recent productivity performance, and the limit it may place on growth, remains an area of risk in relation to forecasts of improved growth in the coming year.
In 2007-08, Treasury expects productivity to rise again to 2.25per cent. This assumes that the spectacular rate of jobs growth comes to an end, while economic growth accelerates.
The report goes on:
Given the recent poor productivity performance in Australia, these growth rates are likely to be more of a challenge than they might once have been … Treasury then expects productivity to slip back to an annual growth rate of 1.75 per cent. One of the problems with poor productivity is that any wage increases flows directly to inflation … If productivity languished at recent levels, such pay rises into the future would threaten the Reserve Bank’s target for inflation, bringing the prospect of further interest rate rises.
I want to state that point again. I think the budget fails to understand the importance of productivity growth as an essential component in ensuring our long-term economic prosperity beyond the days of the mining boom. That is why the Leader of the Opposition and our party have placed such importance on lifting productivity in this country. One of the ways we can do that is by placing substantial importance, as we have, on investment in the education, skills and training of our people. We see that reflected in a number of the major policy announcements that have been made by the shadow minister outlining our vision for an education revolution. All of that vision is predicated on investment in education, skills and training of our people as an essential component in lifting productivity in this nation. We believe that Australia must aspire to becoming the most highly educated and skilled nation, and investment in public education—which continues to cater for almost 70 per cent of our students—and that increased investment in vocational and TAFE training are critical issues that we need to address as we look at the challenges of the decades ahead.
Alongside the importance of productivity growth, beyond the stalling that we have seen in recent years, there needs to be an emphasis on workforce participation. In my view, the measures outlined in the budget this year do not adequately target those groups that are currently not participating in the workforce. We need to remind ourselves that our participation rates in key areas are low in comparison with other OECD nations. What do the budget papers themselves reveal? They show that after 11 years of Howard government complacency Australia is ranked 25th out of 30 OECD countries for prime-aged male workforce participation. Our ratings are incredibly poor for the participation of women of child-bearing age, where again we rank 25th out of 30. We rank only 13th in workforce participation rates for people nearing retirement age and 10th in overall rates of participation. So there is a huge participation challenge facing our nation and we need to address the areas of shortfall. Those groups not currently participating in the workforce need to be targeted to reach the levels of participation that we see in comparable OECD countries.
There is little effort made in this budget on tackling the major reasons for joblessness. One of those reasons is, of course, a lack of relevant skills among jobless Australians. By the government’s own admission, Australia faces a shortage of 200,000 skilled workers over the next five years. At best, all the budget does is add another three Australian technical colleges to the previous list of 25. When you look at the outcomes you see that through the Australian technical colleges initiative we will see fewer than 10,000 trained students and apprentices graduating by 2010. It is a drop in the ocean when you consider the magnitude of the skills shortage that exists and that will grow in years to come. The Howard government’s Australian technical colleges are simply too little too late after a decade of underinvestment, which has resulted in the current skills crisis. Could you believe that this same government, knowing of the impending crisis, slashed its investment in vocational education by 13 per cent in the three years to 2000 and, between 2000 and 2004, increased its investment by only one per cent in real terms? It is no wonder there was so much unmet demand in the TAFE and vocational training sector, and it is no wonder that the government’s response to the growing skills crisis has been totally inadequate.
In response to that fundamental challenge, the Leader of the Opposition announced in his budget reply that Labor was committed to a 10-year $2.5 billion trades training centres plan, aimed at the one million students in years 9, 10, 11 and 12 in Australian secondary schools. Unlike the meagre response through the Australian technical colleges program, Labor’s plan will provide all secondary schools with up to $1.5 million to build or upgrade their VET facilities in order to keep students at school. It will enhance the profile and quality of VET in Schools and provide ongoing real career paths in the trades and apprenticeships for our students. By making VET a viable option for all secondary students, Labor’s plan will make a real and significant dent in the current skills shortage. The longer the government minister pretends that a few technical colleges will make up for more than 11 years of complacency and neglect, the more damage this will do to the prospects of our children in the future and our economic wellbeing. As I said earlier, the government’s plan is a mere drop in the ocean when it comes to addressing the skills crisis. The government’s own figures estimate that we will face a shortfall of 200,000 skilled workers over the next five years.
Infrastructure is another major challenge which the budget did little to address. We have known about our infrastructure shortfalls and bottlenecks for a long time, but what did we see? We saw very little by way of improvement to our roads, ports, transport systems, water supplies and broadband speeds. The BCA estimates our infrastructure shortfall to be to the value of about $90 billion. After the budget, the business community, through the BCA, said:
. . . the key issue still appears to be the lack of long-term integrated planning to drive investment to address ongoing bottlenecks.
They are the words of the business community, not the words of people on the opposition benches. Hear what the business community is saying.
It is amazing that the government has, 18 months after its tabling, failed to respond to the recommendations of the bipartisan committee report on sustainable cities. It is amazing that this government has no national infrastructure coordinating body. It is amazing that its AusLink transport policy neglects city transport infrastructure. It is amazing that its so-called National Plan for Water Security is restricted to rural water issues and does nothing to address the crisis for many of our cities in terms of security of water supply. And it is not surprising, but it is amazing, that the Howard government has no plan for a modern national broadband network. I could go on, but I think I have made my point, and my point is this: the government has relied on the good fortune that has come with the mining boom, but it has done little in the budget to underpin the challenges that this nation faces into the future. (Time expired)